PayPal Holdings, Inc. (PYPL) Q4 2025 Earnings Call Transcript
Access earnings results, analyst expectations, report, slides, earnings call, and transcript.
Overview
The earnings call presented mixed signals. Positive elements included strong non-GAAP EPS growth, solid TPV, and strategic initiatives like partnerships with AI platforms. However, concerns arose from unclear guidance on transaction margins and price-based competition, coupled with slight declines in transaction margin outlook. The CEO change is aimed at execution, not strategy, and investments are expected to show results gradually. The Q&A highlighted uncertainties and competitive pressures, balancing out the positives, leading to a neutral sentiment prediction.
Key Financial Performance
Venmo Revenue Grew approximately 20% to $1.7 billion excluding interest income. This growth was driven by increased active accounts surpassing 100 million and 14% growth in ARPA for monthly actives.
Buy Now, Pay Later TPV Delivered over $40 billion in TPV in 2025, growing more than 20% year-over-year. Growth attributed to increased adoption and expansion of the service.
Online Branded Checkout TPV Grew 1% on a currency-neutral basis in Q4, down from 5% in Q3. The deceleration was due to U.S. retail weakness, international headwinds (especially in Germany), and slower growth in high-growth verticals like travel, ticketing, crypto, and gaming.
Total Payment Volume (TPV) Grew 9% spot and 6% currency neutral in Q4, reaching $475 billion. For the full year, TPV grew 7% spot and 6% currency neutral, reaching $1.8 trillion. Growth was driven by Venmo, Buy Now, Pay Later, and PSP business.
Revenue Grew 4% on a spot and currency-neutral basis to $33.2 billion for the full year. Growth was supported by transaction revenue and value-added services.
Non-GAAP EPS Increased 14% for the full year to $5.31. Growth was driven by diversified contributions from credit performance, PSP profitability, and Venmo monetization.
Adjusted Free Cash Flow Was $2.1 billion in Q4 and $6.4 billion for the full year. Growth was supported by operational improvements and cost management.
Transaction Margin (TM) Dollars Excluding interest, grew 4% in Q4 and 6% for the full year. Growth was led by credit and omni initiatives, PSP profitability, and Venmo monetization.
Monthly Active Accounts (MAA) Increased 1% to 231 million. Engagement, measured by transactions per active account excluding PSP, grew 5%.
Venmo TPV Increased 13% in Q4, marking the fifth consecutive quarter of double-digit growth. Growth was driven by increased use of Venmo debit cards and Pay with Venmo.
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Operating Highlights
Venmo Revenue Growth: Venmo revenue grew approximately 20% to $1.7 billion excluding interest income in 2025. Total active accounts surpassed 100 million, with 14% growth in ARPA for monthly actives.
Buy Now, Pay Later (BNPL): Delivered over $40 billion in TPV in 2025, growing more than 20% year-over-year.
New Product Launches: Launched new products like a debit card and expanded options such as Buy Now, Pay Later, repositioning PayPal for everyday purchases.
Agentic Commerce: Introduced Store Sync offering and agentic purchasing through platforms like Perplexity and Microsoft Copilot. Acquired Cymbio to bring this technology in-house.
International Headwinds: Growth in Germany moderated due to macroeconomic softness, normalization of market leadership, and competition from alternative payment methods.
Omnichannel Expansion: Launched Tap to Pay in the U.S., Germany, and the U.K. PayPal debit card TPV growth accelerated to over 50% in the U.S. and was introduced in Germany and the U.K. with over 700,000 debit card MAAs combined.
Operational Challenges in Branded Checkout: Online branded checkout TPV grew 1% on a currency-neutral basis in Q4, down from 5% in Q3. Challenges included U.S. retail weakness, international headwinds, and deceleration in high-growth verticals like travel and gaming.
Focus on Strategic Merchants: Dedicated teams formed to implement improvements for strategic merchants representing nearly 25% of branded checkout volume.
Biometric and Experience Integration: Efforts to deploy redesigned checkout experiences with biometric authentication to improve conversion rates.
Leadership Change: Enrique Lores appointed as the next President and CEO effective March 1, 2026, to accelerate execution and bring greater discipline to strategic priorities.
Focus on Branded Checkout: Prioritized experience, presentment, and selection to restore momentum in branded checkout.
Investment in Growth Drivers: Targeted investments in branded checkout, Buy Now, Pay Later, Venmo loyalty, and agentic commerce to drive long-term benefits.
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Risk or Challenges
Execution Challenges: The company acknowledged that its execution has not been at the required level, with delays in product deployment and slower-than-expected merchant adoption impacting performance.
Online Branded Checkout Performance: Online branded checkout TPV grew only 1% in Q4, down from 5% in Q3, due to U.S. retail weakness, international headwinds (especially in Germany), and deceleration in high-growth verticals like travel, ticketing, crypto, and gaming.
Merchant Integration Issues: Merchants, especially large ones, require more hands-on integration support than anticipated, slowing progress in branded checkout adoption.
Macroeconomic Pressures: U.S. retail weakness, particularly among lower and middle-income consumers, and macroeconomic softness in international markets like Germany have negatively impacted performance.
Competitive Pressures: Increased competition from alternative payment methods, particularly in Germany, has moderated growth in key markets.
Operational and Deployment Issues: Operational inefficiencies and slower-than-planned product deployment have amplified challenges in branded checkout.
Strategic Focus and Resource Allocation: The company has been optimizing for all merchants, which has slowed its ability to focus on high-impact merchants that represent a significant portion of branded checkout volume.
Biometric and Presentment Challenges: Biometric adoption and competitive placement on merchant sites are critical to branded checkout performance but have not been adequately implemented.
Economic Uncertainty: The company is no longer committing to its 2027 financial outlook due to a more demanding environment than anticipated, including slower e-commerce growth and increased competitive intensity.
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Guidance & Outlook
Branded Checkout: Focus on improving experience, presentment, and selection to restore momentum. Targeting strategic merchants representing 25% of branded checkout volume. Deploying biometric authentication and redesigned checkout experience together. Aiming to bring 50% of consumers to checkout-ready status by the end of 2026. Expecting slightly positive to low-single-digit branded checkout growth for 2026.
Buy Now, Pay Later (BNPL): Investing in upstream BNPL messaging and second payment buttons to improve branded checkout performance. Early data shows a 10% lift in branded checkout volume when BNPL offerings are presented upstream.
Venmo: Venmo revenue expected to exceed $2 billion in 2026. Focus on evolving Venmo into a monetized commerce platform. Launching PayPal Plus rewards program in Europe and the U.S. in 2026 to drive engagement.
Agentic Commerce: Developing agentic commerce capabilities to become the default payment option for AI-powered shopping. Store Sync offering connecting merchants with agentic chat platforms. Not expected to materially impact 2026 growth but positioned for future scalability.
Omnichannel Initiatives: Scaling omni initiatives, including Tap to Pay and debit card offerings in the U.S., Germany, and the U.K. Positive initial results with plans to extend success through 2026.
Enterprise Payments: Focus on expanding value-added services and omnichannel capabilities. Expecting to add new merchants and expand volumes in 2026.
Financial Guidance for 2026: Targeting low-single-digit revenue growth on a currency-neutral basis. TM dollars expected to decline slightly or remain flat excluding interest. Non-GAAP EPS projected to range from down low-single digits to slightly positive. Approximately $6 billion in share repurchases planned.
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Shareholder Return Plan
Quarterly Dividend: PayPal paid its first quarterly dividend of $0.14 per share in the fourth quarter of 2025.
Share Repurchase Program: PayPal completed $1.5 billion in share repurchases in the fourth quarter of 2025, bringing the total for the year to $6 billion.
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Key Q&A
Q:Can you provide assurance that the CEO change is primarily to address execution rather than strategy?
A:The Board's decision is based on execution. They have been discussing this for months. Enrique has a strong track record in innovation and operationalizing transformations. His familiarity with the company should help shorten the typical cycle for a new CEO.
Q:How do you plan to get merchants to adopt your modern online checkout offering?
A:Engaging with merchants involves tailored strategies, including driving merchant integrations, leveraging biometrics and passkey, and co-marketing. The company has reorganized teams to focus on high-impact merchants and aggressive upstream presentment strategies, which have shown higher performance during the holiday season.
Q:What is the timeline for investments to show results, and will transaction margin dollars improve in the back half of the year?
A:Investments have already started and will impact throughout the year. The company does not expect a back-end loaded year but will monitor initiatives' performance. Transaction margin dollars are expected to show slight decline for the year due to growth investments and other factors.
Q:What is included in the 2026 outlook, and can branded volumes turn the corner?
A:The 2026 outlook includes slight decline in transaction margin, flat operating expenses, and low-single-digit non-GAAP EPS growth. Branded volumes are expected to gain traction as merchant integrations and upstream presentment improve. Enrique has been involved in shaping the strategy and is focused on continuity and acceleration.
Q:Is the branded checkout shortfall more attributable to consumer or merchant experience?
A:The shortfall is attributed to both consumer and merchant experience. Factors include U.S. retail weakness, moderating international growth, and slower product deployment. The company is focusing on improving merchant integrations, consumer biometrics, and loyalty programs to address these issues.
Q:Can PayPal grow earnings if branded doesn't improve, and is there concern about price-based competition?
A:PayPal has diversified revenue and margin growth sources, including Venmo, PSP, debit, and credit. Even with low branded growth, the company delivered solid transaction margin dollar growth and mid-teens EPS growth in 2025. Investments in upstream presentment and product competitiveness are ongoing.
Q:Why not focus entirely on merchants to drive growth?
A:The company believes in balancing focus on both merchants and consumers. Merchants benefit from the value of PayPal's consumer base, and consumers benefit from strong merchant offerings. Investment dollars are currently very merchant-focused.
Q:Are all options on the table for creating shareholder value, including asset sales?
A:The company is focused on transforming the business and driving shareholder value through its integrated strategy. Current plans involve leveraging unique assets like Venmo and Enterprise Payments, which are core to value creation and complement the portfolio.
Q:Does the branded outlook for 2026 represent an acceleration versus Q4?
A:The branded outlook for 2026 is slightly positive to low-single digits. January quarter-to-date performance is slightly better than Q4.
Q:Review of Unclear Management Responses
A:Management avoided directly addressing whether branded business can be turned around amidst intensified competition and macro challenges. They also did not provide clear details on how upstream presentment investments will impact transaction margin dollars or address concerns about price-based competition in depth.
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Earnings Word Cloud
The most frequently occurring keywords in this quarter's earning call
BNPL
Buy Pay
CEO
Chair
Enterprise Payments
Investor Day
PSP
PayPal Full
Store Sync
TPV MAAs
UK
Verifone
account
app engagement
app use
approach
chat
checkout challenge
checkout today
default payment
digit volume
discipline priority
engagement checkout
environment challenge
experience biometrics
experience presentment
flywheel result
improvement
merchant experience
merchant volume
offer
path
period
placement
presentment selection
profitability
role
year value
PYPL Transcript
PayPal Holdings, Inc. (PYPL) Q4 2025 Earnings Call Transcript
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The earnings call presented mixed signals. Positive elements included strong non-GAAP EPS growth, solid TPV, and strategic initiatives like partnerships with AI platforms. However, concerns arose from unclear guidance on transaction margins and price-based competition, coupled with slight declines in transaction margin outlook. The CEO change is aimed at execution, not strategy, and investments are expected to show results gradually. The Q&A highlighted uncertainties and competitive pressures, balancing out the positives, leading to a neutral sentiment prediction.
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